Insurance Carriers May Delay Issuing Payment of Settlement Pending Determination of Medicare’s Reimbursable Conditional Payment

As we approach January 2012 when CMS will enforce mandatory reporting by insurance carriers for liability settlements, do not be surprised if more insurance carriers delay issuing payment until Medicare’s interests have been satisfied.  Insurers are concerned, and rightly so, that they will be held responsible by CMS for repayment of Medicare’s conditional payment under the Medicare Secondary Payer Statute if the Plaintiff fails to satisfy the debt. While you might argue that such behavior constitutes ‘bad faith’ the Courts will disagree.

In June, 2011, the United States District Court Western District of Kentucky decided that an insurance carrier had not acted in bad faith when it delayed issuing payment of the settlement. See Wilson v. State Farm Mutual Automobile Ins. Co. More insurance companies are including language in their General Release that acknowledges that the Plaintiff has a legal obligation to protect CMS’ interests and identifying how much money will be set aside to satisfy Medicare’s interests.  This places responsibility on the Plaintiff’s counsel to conduct due diligence before the case settles to determine whether the client is or is expected to be a Medicare recipient within 30 months.  If the answer to the question is ‘yes’ you will want to engage a specialist with Medicare experience to review the past two years’ of your client’s medical records and billing to determine the proper set-aside amount.  Remember that there are exceptions to a Medicare set-aside arrangements!

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